Icahn signs confidentiality deal with Dell

Agreement will allow activist shareholder to look at company books

Carl Icahn has agreed a confidentiality deal with PC maker Dell that allows him to look at the company’s private accounts, according to a short statement published yesterday. Simply announcing the agreement, the statement adds that ‘Icahn Enterprises looks forward to commencing its review of Dell’s confidential information.’

The billionaire and activist shareholder last week dived into the well-publicized row over a $24.4 bn deal to take the company private and back under the control of founder Michael Dell and partner Silver Lake. ‘We are substantial holders of Dell shares,’ states Icahn in a letter to Dell dated February 5.

Taking advantage of the firm’s go-shop period, Icahn urges Dell to pursue a leveraged recapitalization and pay a $9 special dividend if the bid to go private is voted down by shareholders. Added to what Icahn calls the ‘stub’ value of $13.81 per share price proposed in the go-private bid, the special dividend would offer a value of $22.81 per share, ‘representing a 67 percent premium’ to the share price offered in the buyback.

‘We have spent a great deal of time and effort in determining the $22.81 per share value,’ Icahn continues, ‘and would be pleased to meet with you to share our analysis and to understand why you disagree, if you do,’ adding that he hopes the board will adopt his proposals, which ‘would avoid a proxy fight’.

But if the board does not agree to implement his proposals in the event the go-private bid is voted down, Icahn says the vote should be combined with an annual meeting to elect a new board of directors. Dell’s annual meetings are usually held in June or July.

‘We then intend to run a slate of directors who, if elected, will implement our proposal,’ continues the letter. Icahn also says that if this board were elected, Icahn Enterprises would provide a $2 bn bridge loan, while he would personally provide another $3.25 bn bridge loan to Dell in order to guarantee the availability of funds for the proposed $9 special dividend.

If the current board fails to agree to combine the annual meeting with the go-private vote, Icahn says ‘we anticipate years of litigation will follow, challenging the transaction and the actions of those directors who participated in it.’ That situation can be avoided by following the ‘fair and reasonable path’ proposed by Icahn Enterprises, he adds.

‘We believe, as apparently does Michael Dell and his partner Silver Lake, that the future of Dell is bright,’ concludes Icahn. ‘We see no reason why the future value of Dell should not accrue to all the existing Dell shareholders – not just Michael Dell.’

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